Endowments 'still mis-sold on a huge scale

Endowment mortgages are still being mis-sold on a massive scale, a TV documentary will reveal tomorrow.

Two thirds of companies in this business are mis-selling the products, according to the BBC's Panorama. Its makers say a senior figure at the Financial Services Authority told them the regulator thinks only a third are giving proper advice. He says this is a 'poor picture'.

The FSA says most current endowment policyholders - 3 million households - may end up with a too little from the insurers to pay off what they owe on their homes.

Michael Folger, director of investment business at the FSA, is said to have told Panorama: 'In only about a third of the cases could we be confident that the right advice has been given. We've made it clear that firms have got to get their act together through this year.'

In the Eighties as many as 80 per cent of home loans were sold with endowments, insurance policies intended to repay the loans on maturity. In recent years the figure has fallen to a third or less.

Panorama secretly filmed an agent representing insurer Allied Dunbar who was apparently promoting endowment policies as superior to repayment mortgages. This contravenes the new mortgage code of conduct.

Allied Dunbar said it was unable to comment fully on the allegations because it had not seen a transcript of the programme, but it believed it has taken a 'partial view' of what the salesman said.

A member of an FSA advisory panel tells the programme that the Government seems frightened of the financial services industry.

The FSA said it was preparing to take disciplinary action against some firms for failures leading to mis-selling. The regulator has also told insurers to warn policyholders in writing if their policies are not on course to yield enough to repay their loans.